Trial of former Health Services Union boss Kathy Jackson to go ahead

Nick Toscano and Ben Schneiders

A long-awaited trial over former union leader Kathy Jackson's alleged misuse of $1.3 million in union funds will go ahead, despite her last-minute declaration of bankruptcy.

On the eve of the trial's start date earlier this week, Ms Jackson's lawyers announced she had become an undischarged bankrupt, which threatened to derail the Health Services Union's bid to claw back the allegedly misappropriated money.

Ms Jackson, former national secretary of the HSU, is accused of having used three union credit cards and money from a secret slush fund on lavish personal indulgences including designer clothes, overseas holidays and dinners at some of Melbourne's best restaurants.

She also allegedly used union money on exercise equipment, mortgage repayments and contributions to a divorce settlement.

The HSU on Friday applied for the case to continue. The bid was not opposed by the trustee of Ms Jackson's bankrupt estate.

"Given the fact that the trial has been fixed for hearing and all necessary preparations made for that hearing, and having regard to the complexity of the issues involved, it is preferable that the court resolve those issues rather than that they fall for determination by an under-resourced trustee," Justice Richard Tracey said.

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"Accordingly I will accede to the application made by the union."

Justice Tracey ordered that Ms Jackson's trial will begin on Tuesday.

Ms Jackson shot to prominence as a whistleblower on corruption within the HSU involving former national president Michael Williamson, who is now in jail, but she has come under fire over her own conduct and now faces similar allegations in the large-scale lawsuit against her.

The union is seeking about $2.5 million including compensation, interests and costs.

In a defence statement, Ms Jackson said vouchers supporting each credit card expense were handed over to the union branch bookkeeper and submitted for approval. Ms Jackson denies any payments were unauthorised or improper, and claims she had permission to spend $28,000 a year on travel for conference and sabbatical purposes.

Ms Jackson is also being investigated by Victoria Police for alleged criminal theft and fraud.